‘Perfect storm’ sees insurance disputes spiral

‘Perfect storm’ sees insurance disputes spiral | Insurance Business

‘Perfect storm’ sees insurance disputes spiral
General insurance disputes have risen 19% to highs not seen since 2011-12 thanks to ‘a perfect storm’ gripping the industry.

Insurance disputes saw a rapid increase thanks to a combination of factors, said John Price, Financial Ombudsman Service lead ombudsman – general insurance,  as claims remain a contentious issue for brokers, insurers and consumers alike.

“It is a combination of factors coming into FOS; it is almost a perfect storm,” Price told Insurance Business.

“We have these extremely high levels of declined claims compared to what we are seeing in the past, there is a greater awareness of FOS and its activities and roles, and so people frustrated with the process with the insurer are coming directly to FOS rather than exercising their IDR (internal dispute resolution) rights.”

These factors, combined with an industry resourcing issue and changes to the FOS framework which the industry is yet to fully adjust to, have seen disputes rise.

Brokers are linked to just 4% of general insurance disputes, but Price said that disputes generally arise through failure to obtain the appropriate policy for a client, which then calls into question whether brokers have breached their duty of care.

Price said that the duty of care for brokers is high. This means that, if a dispute arises, a broker needs to be able to prove that they “fully canvassed and recorded the consumer’s insurance needs, that they have undertaken reasonable efforts to arrange the policy.

“That doesn’t mean simply going to their preferred portal to get to their preferred insurer, but actually doing the proper research.”

Communication remains key for both brokers and insurers, particularly around claims, as keeping clients informed can help head off many disputes.
“It is about communication but it is also about keeping a record of that communication.

“Gone are the days of having a diary with a blank page and a line across it – meeting with so and so,” Price said. “You have got to record the information.”

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